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Panel I, 27 – Bjørner/Togeby Industrial Companies ' Demand for Energy Based on a Micro Panel Database – Effects of CO 2 Taxation and Agreements on Energy Savings

By Thomas Bue Bjørner and Mikael Togeby

Abstract

In this paper we present an analysis of the effects of CO2 taxation and energy agreements on electricity and total energy use in Danish industrial companies. An econometric panel data analysis of industrial demand for electricity and energy is presented. In the panel energy consumption, production and value added are observed at company level. We estimate price and production elasticities for electricity and total energy (i.e. measuring the X per cent change in demand of say electricity of a one per cent increase in the price of electricity). The estimated price and production elasticities are allowed to vary according to company characteristics such as industrial sub-sector, company size, energy intensity and type of ownership. Most previous econometric studies on industrial energy demand use aggregate data, while a couple of micro level studies mainly employ cross-section analysis. To our knowledge this is only the second econometric study on industrial energy demand based on a large micro panel database. More than 2,700 Danish industrial companies during the period 1983 to 1995 are included in the model (covering the majority of all Danish industrial energy consumption). We find that estimators of electricity/energy demand that take account of the panel structure (fixed effects models) result in very different price and production elasticities compared to estimators that do not. This suggests that elasticities obtained from studies based on micro cross-section data may be biassed. One advantage of micro data is that these data can be used to estimate the effect of an instrument like voluntary energy agreements. By entering a »voluntary « energy agreement a Danish company avoids paying the usual CO2 tax. We find (preliminary results) that there is a positive gross reduction of electricity and total energy consumption of companies with energy agreements. However, we also find that companies would have had lower electricity consumption if they had not entered an agreement, but instead paid the full CO2 tax. Thus, our (preliminary) analysis suggests that the net effect on electricity use of the voluntary energy agreements is negative

Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.194.8836
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